Oil prices: Plan to deregulate freight margin scrapped

Petroleum product rates to remain same across the country.

Zafar Bhutta September 02, 2011


The government has finally given up on the plan to deregulate the inland freight equalisation margin (IFEM) on petroleum products, which, if implemented, would have led to different oil prices across the country and intense criticism from political parties.

Officials in the Ministry of Petroleum and Natural Resources told The Express Tribune that the Economic Coordination Committee (ECC), in a meeting held on August 23, came to the conclusion that IFEM on oil prices would not be deregulated in the face of strong political opposition.

ECC took the decision after coming to know that some political parties including the Awami National Party (ANP) had pressed the government to take back the proposal of deregulating IFEM which the committee approved on July 1, 2010. According to sources, these political parties also said if the government wanted to deregulate IFEM on petroleum products, then prices of electricity should also be deregulated and left to market forces.

Sources said the ECC abandoned the plan following the submission of a summary by the petroleum ministry on August 23, 2011. The summary demanded scrapping of the plan to deregulate IFEM due to opposition by parliamentarians, especially from Khyber-Pakhtunkhwa, during meetings of a committee constituted by the prime minister for review of petroleum product prices.

If implemented, the proposal would have done away with uniform prices of petroleum products across the country, with higher prices in regions far from ports and refineries and lower prices in areas close to ports and refineries.

According to an assessment of the impact of IFEM deregulation done in May, prices of petroleum products were projected to rise up to Rs4.76 per litre in northern areas and fall up to Rs4.12 per litre in some other parts of the country.

Earlier, ECC had approved deregulation of road and rail components of IFEM on July 1, 2010 and deregulation of petroleum product prices on October 15, 2010 with directives to implement them at an appropriate time.

Prices of petroleum products including motor spirit (petrol), high octane blending component (HOBC), light
diesel oil (LDO) and aviation/jet fuels have been deregulated effective from June 1
this year as per formula approved by ECC.

Published in The Express Tribune, September 3rd, 2011.

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